America has been corrupted. Instead of a Republic which represents the citizens as expressed in elections, we have a Republic which represents those with the money to buy influence. This did not happen overnight, or within just a few years, but over the course of our history. Attempts by the government to respond to economic instability resulted in policies that deposited more and more power into the hands of the those who controlled the most currency, the banks. The bankers then used that power to do what humans always do; influence events to their own advantage.
The concept of central banking itself was introduced as a method for stabilizing currency and preventing the chaos which ensued when local banks defaulted. (1) The concept of national banks themselves were bitterly disputed in early America. Many considered them unconstitutional, as there was no direct authority for the federal government to create incorporated entities. This debate came to a head in 1819 when the Supreme Court ruled on McCullouch V Maryland (2) that the Necessary and Proper clause of the Constitution was the source of implied powers granted by the people when they endorsed the Constitution. Thus affirming not only the concept of central banking, but also the interpretive method of Constitutional Law.
However, this would not result in the permanent establishment of central banking. President Jackson, a strong follower of Jefferson, felt the central bank held too much power and broke it after a long bitter battle. This resulted in in small banks throughout the nation, with limited reserves, that would collapse every time a downturn caused a run on the bank because the money was invested in the community and not on hand to be paid out.
In 1913, President Wilson signed the Federal Reserve Act Proposed by Senator Glass of Virginia. This was a compromise plan designed to create a central banking system, but the bank itself would be decentralized. Controlled by regional branches throughout the country, the Federal reserve would supply money, be a lender of last resort, and control interest rates as a method of stabilizing the economy. With some minor changes, this is still our banking system today.
As a result of the improved currency strength, the fact that US currency was backed by gold while the rest of the world was switching to fiat currency, and the new industrial age in America; the 1920s saw an economic boom unprecedented for the United States up to that time. Due to a combination of factors, including speculation, poor currency management, and shortsighted government policies, the inevitable economic downturn quickly spiraled into a depression. (3) Out of this came several legislative acts, between 1932-33, designed to prevent a repeat of the same mistakes, known collectively as the Glass-Steagall acts. (4) These acts made it illegal to for a commercial bank to also function as an investment bank, or for board members to serve in both organizations, due to conflict of interest. It also created the FDIC, in order to prevent bank runs, by guaranteeing that depositor money was secure.
In 1934 the first version of the Securities Exchange Act was passed which included the legal definition of people as: "The term "person" means a natural person, company, government, or political subdivision, agency, or instrumentality of a government." (5) Essentially stating that for legal purposes organizations have the same rights as humans.
So, at this point we are 147 years into American history and we have established inferred powers, central banking, and corporations as people, but balanced by decentralization, regulation, and the FDIC safety net. Under these policies the US would maintain the longest period of sustained economic growth in its history.
The next significant change in our economic policies would not come until 1971 when President Nixon changed US currency from commodity backed to Fiat. Roosevelt had ended the practice of being able to exchange dollars for gold years earlier, but it was Nixon who ended the backing of currency by gold and silver reserves. (6) The perceived benefit of a system in which money is valued at what the government determines it to be, is that the economy can grow without restrictions. While there is truth to this, it is also true that when there are economic downturns there is nothing to restrict the depreciation of the currency other than the manipulations of the central bank.
In 1976, the Supreme Court ruled on Buckley V Valeo, (7) a case involving campaign finance and the 1971 act which had created the FEC. It was ruled that the government could regulate how much people donated to a campaign, but not how much a person spent on their own campaign or how much an independent person spent on political statements. This would be popularly referred to as "money is speech".
During the 1980s, President Reagan introduced an economic policy known as Supply Side, based on the theory that if you fund the producers in an economy, the rest will grow organically. (8) He practiced this theory by lowering taxes, or introducing tax breaks, to certain sectors of the economy, while investing government funds into others. These investments were funded by planned government debt, called deficit spending. Proponents suggesting that under a fiat system it did not matter how much debt was incurred as long as some payments were always made.
In 1999 President Clinton signed the Gramm-Leach-Bliley Act (9) which repealed those provision of Glass-Steagall that prevented commercial and investment banks from merging or people from serving on the boards of multiple banks. Arguing that this would allow customers greater flexibility with their income, the banking industry had pushed for this man years. After its passage, the American banking industry quickly consolidated into a few massive bank conglomerates.
As the United States entered the New Millennium, currency was unsupported, banking was consolidating, regulations were shrinking, money was speech, corporations were people, and it was government policy to create debt for citizens in order to prop up business.
President Bush passed a series of tax packages from 2001-3 (10) which lowered taxes for all Americans, incrementally increasing that reduction for those individuals and businesses who earned more. This successfully added fuel to the growing credit bubble that was the engine behind the economic boom. When the bubble burst in 2008, President Bush responded with a series of tax rebates, cuts, and subsidies designed to recreate the growth cycle. While this policy did slow the economic descent, it did little to generate growth as it was the financial institutions themselves which were collapsing. Having consolidated the banks, a minor rumble quickly became an earthquake.
In 2009, the Supreme Court ruled in Citizens United V Federal Election Commission (11) that the First Amendment protects organizations, citing precedents involving the NAACP and others. Ignoring the fact that the NAACP was defending the right of people to speak in a public gathering for free, not the right of the organization to pay to present commentary. This resulted in a proliferation of Super-Pacs dedicated to collecting anonymous donations and then advocating political views without accountability.
Although President Obama argued for a Keynesian philosophy, his actions furthered the Supply Side theory throughout his early Presidency. (12) The Stimulus package invested in banks and corporations. Health Care Reform created a corporate trust, and then required all citizens to buy from it or face a tax penalty. In 2010 he signed legislation renewing the "Bush tax cuts".
2012 will mark the 225th anniversary of the US Constitution. In that time we have transformed from a nation which believes in individual liberty, into a nation which serves the interests of corporations. We have personified business, legalized bribery, allowed profit for the few to be more valuable than stability for all, and refused to learn any of history's lessons. With each new political policy giving more influence to the banks, the influence of citizens diminished. Is it any wonder that so many of our citizens feel betrayed by their leaders?